Your View by Lehigh professor: How quickly will economy recover from coronavirus?

The roads to Disney World in Orlando are little traveled as the park remains closed.
The roads to Disney World in Orlando are little traveled as the park remains closed. (John Raoux/AP Photo)

How do we get out of this economic hole? First, it depends on how quickly pharmaceutical firms can develop a vaccine (probably another 18 months) and effective drugs (if we’re lucky, by this summer). We’ll also need a massive testing system that will allow us to trace and isolate new cases and their contacts before they can spread the virus.

Let’s assume that by summer we have drugs that reduce the severity of the virus and a comprehensive test and trace system in place. Will the economy quickly snap back to normal?


The unprecedented wave of spending and loans coming from the U.S. Treasury and the Federal Reserve are intended to keep businesses and households solvent until social distancing guidelines can be relaxed. The hope is for a so-called V-shaped recession, with a rapid decline in production and employment being followed by a rapid recovery.


Will Powell be right? The country experienced a similar pandemic in 1918 with the Spanish flu. An estimated 550,000 people died, or about 0.5% of the U.S. population — the equivalent of 1.65 million dying today.

A new paper by economist Robert Barro of Harvard estimates the economic effect on the United States of the 1918 pandemic as being surprisingly small: a reduction in real gross domestic product per capita in the United States of only 1.5% and a reduction in real consumption of only 2%.

Anthony O'Brien

Why such a small effect? In 1918, far less sheltering in place occurred. For instance, although historians have praised the response of the public health authorities in New York City, they allowed schools, restaurants and most other businesses to remain open.

Without consciously intending to do so, the America of 1918 traded a higher death rate for a more robust economy. That’s not a deal the America of 2020 should make.

For purposes of assessing government policies, economists have estimated the value of a life to be $10 million (we ain’t called the dismal science for nothin’). Suppose we immediately switch to 1918-style haphazard social distancing, resulting in 1918-level death rates. The result would be a loss equal to $16.5 trillion, or about 80% of 2019 GDP. A staggering economic (and human) toll that we should avoid.

Assume we stay the course until summer when we have effective drugs and a test and trace system up and running. Will people pick up where they left off before the virus arrived, as happened in 1918? It’s possible because a pandemic is similar to a hurricane, earthquake or other natural disaster.

Typically, a local economy hit by a natural disaster recovers quickly because people’s first impulse is to rebuild and move on with their lives. A pandemic does no damage to infrastructure, so in that sense may be easier to bounce back from.

But, putting on my sociologist’s hat (it’s a beanie with a propeller), a pandemic can be more traumatic than a hurricane because it’s more widespread and kills more people. In 1918, people persevered despite the high death rate, but death was more common in those days.

Even before the flu pandemic and the combat deaths from World War I, the U.S. death rate was three times higher than today; the infant mortality rate was 20 times higher. Nearly everyone had experienced the death of a child or a family member in the prime of life.

If today we find death more distressing, will the fear of contracting coronavirus — or some new virus that may be lurking — make people reluctant to get on an airplane, attend a sporting event or movie, use public transit, visit an amusement park or live in a college dorm?

There have been suggestions that airlines may begin flying with some seats or rows kept empty. Sports arenas, concert venues, cruise ships and movie theaters may take a similar approach. Restaurants may significantly increase the space between tables. Retail stores, supermarkets and amusement parks may limit the number of people allowed in at one time.

But taking such steps will reduce the revenue these businesses earn, forcing some into bankruptcy.


Eventually, firms will adapt. Disney may devote more resources to its streaming services and fewer resources to its theme parks. Amazon may build more warehouses to meet the increased consumer demand for buying online.

Pharmaceutical firms may devote more resources to developing vaccines, antiviral drugs and diagnostics tests. Supermarkets may expand home delivery. Colleges may teach more courses online. Medical equipment firms may develop new machines to help patients suffering respiratory distress.

But it will take time for firms and workers to adjust to these changes, making the recovery longer and slower — more like a Nike swoosh than a V.

Anthony O’Brien is a professor emeritus of economics at Lehigh University.